In this High vs. Low Society that we live in, participation levels in the Supplemental Nutrition Assistance Program are soaring. The higher end consumer, meanwhile, continues to come back strongly.
Since late 2009, Keith has referred periodically to the participation levels in the USDA’s Food Stamps Program. Each time, it was noted that the percentage of the population participating in the program has increased drastically since Bernanke took the helm at the Federal Reserve. February’s data shows that almost 40 million people, or one-in-eight Americans, received food stamps (chart 1, below). While this is a staggering number, it could grow even without deterioration in the consumer; researchers are commenting that one-in-three people eligible for the program are not taking advantage of the benefits.
For context, in November 2008 we wrote a note entitled, “EYE ON POVERTY: FOOD STAMPS”, that discussed the number of participants in the program exceeding 30 million for the first time. According to USDA forecasts, the number of participants will increase to 40.5 million by the end of this fiscal year, ended September, and will grow to 43.3 million in 2011. New highs have been set, monthly, since December 2008. Interestingly, as Director of Hedgeye’s Retail Team, Eric Levine pointed out in a recent note, the sequential growth in monthly Food Stamps Program participants is slowing for now (chart 2). Levine points out that this is “marginally good news for those concerned about the state of the U.S. consumer”. However, over the longer term, should our Q2 theme, Inflation’s V-Bottom play out and high unemployment levels persist, the situation could continue to deteriorate. As unemployment benefits run out for some of America’s jobless, it seems clear that a larger proportion of eligible people will take advantage of the program.
At the end of the day, numbers don’t lie; people do. Since March 2009 the S&P500, fuelled by the Fed-sponsored Piggy Banker Spread, has shot up almost 70% (taking into account recent market declines). From March 2009 to February 2010, the number of people enrolled in the Food Stamps program increased 20%. Our view on Inflation’s V-Bottom continues to be confirmed by the data (see the Early Look from May 11) and will only serve to exacerbate the situation lower and middle class families face with the stagnant employment outlook. The employment outlook, along with mounting inflation, is taking a toll. We have said it before; many of those on Main Street are not experiencing the “recovery” that has bolstered Wall Street.”